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Issue of May 2004 

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Outsourcing data centers

External help with a data center

Managing a data center's day to day operations and infrastructure issues may call for an external helping hand. Outsourcing part, or even the entire job can give a company certain management and financial benefits if handled properly. Here's a look at the various outsourcing options and ways to choose the right outsourcing job for your organization. by Anil Patrick R

Not every organization has the financial capability and skill sets to handle the functions of a data center in-house. And it's not feasible for many organizations to set up one on their own, due to the lack of capital investment. These organizations will ideally prefer to concentrate more on their core businesses than set up a data center and look after management intricacies.

It is beneficial for such organizations to look at the outsourcing option. “If an organization is not much into technology, it should stick to the core business. Outsourcing is easier for such businesses than getting into issues like attracting the right talent, retaining and training them for an in-house IT team,” said Anil Gidh, Associate Director, Capgemini India. Outsourcing is also beneficial for organizations wanting to cut costs on supplementary tasks.

As companies all over the world focus more on core competencies and reducing costs, processes that were earlier considered core activities, are increasingly being outsourced. “Organizations started hiring out activities that added less value but required high resources. Further, as the volume of data expanded, newer applications needed to be run, and data centers provided just the opportunity and expertise,” said Shivaji Chatterjee, Senior Director, Sales and Marketing, HECL.

The outsourcing option

To outsource or not is not the question. Unless the organization has a full-fledged IT team with the wide skill set range required for complete data center management, outsourcing will be required. So the question is how much to outsource?

The ratio of outsourcing to in-house management varies across organizations. There is no standard approach for this. This will vary across organizations according to the business needs and factors like in-house capabilities. A mix and match of inhouse management and outsourcing is the optimal solution.

“This is where you need reliable partners who are competent in the core issues like hardware and servers. As an IT team, we manage the business issues, which is the information residing in the data center. The partners manage the facility. This way we can render better service to the internal customers,” said V. Subramaniam, CIO, Otis.

Pros and cons have to be weighed carefully before making the decision. “By weighing the benefits, risks, costs, performance, and overall value of outsourcing versus managing systems in-house, an organization can create a highly focused strategy that serves as a roadmap for managing the technology,” said Ashok N. Shah, Executive Director (Internet Services), Rolta India.

See ‘Outsourcing risks’ for some of the drawbacks of going in for outsourcing.

Outsourcing flavors

According to Avinash J, President, Sify Hosting, some of the commonly available options when outsourcing data center operations are the following.

Full IT Function: Clients outsource full responsibility for the ongoing operation and management of their entire IT function—from planning, to developing and maintaining applications, to operating data centers and networks.

Design, build and operate: This offers complete application services to the organization—from the design, configuration and implementation of a system, to its ongoing maintenance and operation.

Application Service Provider (ASP): ASPs usually provide their services on a subscription or monthly fee basis, thus eliminating the need for organizations to spend large sums up-front purchasing software or hardware. ASPs also generally take responsibility for installing, maintaining, and upgrading the software and perform vital central data center functions. However, this is usually done on a remote or automatic basis. The organization must still assign staff to run and maintain the software applications.

Business Service Provider: Provides business process services like CRM, SCM, and financial management on a service provider model.

On Demand Computing: Provides computing resources like servers, storage, and bandwidth to clients as and when required by the client. This way, the investment made by the organization on computing resources is minimal and it has the option of renting additional capacity when required.

Outsourcing offerings

There has been a paradigm shift in the Internet Data Center (IDC) space in terms of services being offered. The shift of IDCs from being just infrastructure providers to providers of a range of services has been very rapid.

As outsourcing became more acceptable to enterprises, enterprises started outsourcing more to data centers. “Data centers started offering equipment on rent/lease and became pre-launch test beds for applications. They also started offering value-added services like OS administration, database administration, security services, both remote and on-site,” said Avinash J.

It is important to consider the management and financial benefits at this stage. Small organizations without the large IT capabilities required to run a data center can get the best value for money by outsourcing the entire data center. This will involve co-location at an IDC as well as outsourcing the management. The very rapid technological obsolescence rate is another factor that deters companies from getting into having their own data centers. Using a co-location facility can be beneficial in combating this since most facilities have options to lease out infrastructure like servers and storage.

The outsourcing options available start right from basic co-location services to managed services, remote management, and disaster recovery. The options available on the management front are the services offered by IDCs as well as those offered by infrastructure management specialists and vendors.

Some of the common services offered by IDCs are server performance and storage management. Remote management of organizational setups is also being offered by data centers. IDCs are also getting into facilities management with onsite staff.

Managed security services offered include those like managed firewalls, intrusion detection, and prevention. Disaster recovery and business continuity solutions are also becoming integral parts of the service offerings. On-demand services are also catching on in a major way in IDCs.

Making the right choice

The following parameters are helpful when choosing an outsourcing partner.

A good reputation and track record, supplemented by site visits to earlier and existing projects is a good starting point. Checking sample documentation generated for previous/ existing customers is also helpful. Cross checking if the vendor is capable of fulfilling the promises he makes, and going through audit reports are also important and can be done at this stage. Also check the financial strength of the partner.

It is important to be able to calculate the amount of flexibility that the vendor will provide. The outsourcing partner must be able to respond quickly to changes. Turnaround times should also be very minimal in a data center-based infrastructure model. Simulating a sudden failure will help in finding out the turn around times as well as the reaction that the vendor will display in an actual situation.

On the human resources front, the vendor must have the suitable capability in terms of suitably skilled personnel. He must also be capable enough to provide additional resources when required. For instance, at times when sudden infrastructure expansion happens due to unanticipated requirements.

Once the validity of these parameters has been ascertained, it is necessary to look at the most crucial aspect—cost. It is necessary to have reduced costs of owning and maintaining high-end resources without compromising on the service level quality.

“Evaluating the price-performance metrics, needs to be any CIO/CTO's primary selection criterion. Clients need to have their requirements clearly defined, and rate potential providers based primarily on the qualities of the service offering, skillsets, expertise, and experience the provider has in servicing similar clients,” said Sharad Sanghi, CEO & MD, Netmagic Solutions.

When all the conditions are satisfactory, it is time to negotiate an SLA. SLAs detail various items like infrastructure and the scope of services provided. These generally cover parameters like expected uptime, number and cost of expected resource utilization, financial penalties, resolution times, maintenance windows applicable for each environment, cost per application/ per server/ per database, and reporting requirements.

It will also have frequency of meetings, and escalation procedures within the customer and the Outsourcing Service Provider (OSP). “Normally, an SLA details the service level expected for each characteristic, type of coverage (24x7, 24x5, working hours only), DR parameters, backup criteria, and machine resources usage. The SLA should also list exclusions. Exclusions are the jobs not covered in the SLA like performance tuning, ad-hoc reporting, and upgrades,” said Sagar Sule, VP - Technical & Operations, Cyquator Technologies.

Monitoring outsourcing

Unless measurement is done on the quality of outsourced services, it is difficult to keep track of the service levels. This is why performance metrics are critical for effective SLA reviews.

The most common means of obtaining outsourcing performance metrics are monthly uptime reports, Web portal reports, MRTG reports, and application response reports. However, as the data size increases, these methods can become quite difficult to manage. In such a situation it is necessary to deploy SLA compliance measurement tools. These tools can generate graphical as well as textual data.

Anil Patrick R can be reached at

Outsourcing risks

The risks involved in outsourcing also have to be considered. For example, when handing over management to an outsourcing agent, it should be clearly understood that the same team managing your infrastructure will also be managing multiple customers. This could mean lesser levels of expertise.

Coordinating with an outside entity can also be an issue in outsourcing. This is where the vendor's level of involvement in the partnership is crucial. Security concerns are also present in a co-located environment due to its common nature. This can lead to regulatory hassles if your organization's regulators raise issues.

“A question is, whether your organization is comfortable with outsourcing its information, which is the intellectual capital. Another question is whether your outsourcing partner is competent enough. Are they giving trust and faith to the partnership?” asks Subramaniam.

Confidence levels in the partners are still lacking in India. This is why organizations are still wary of hosting crucial servers in co-located facilities. These servers continue to be hosted in-house.

The data center checklist

Sharad Sanghi suggests certain useful questions that need to be asked when choosing a co-located hosting option. Certain questions apply only when organizations look for managed hosting partners.

Facilities and Infrastructure Criteria

  • Does the data center have redundant precision air-conditioning required to maintain an optimal environment for servers and network devices?
  • Does the data center have multiple redundancies built into their power infrastructure to prevent any electrical downtime?
  • Is the data center built to conform to world-class standards for hosting environments?
  • Does the data center provide quality, scalable rack and cage solutions that are tailor-made to the customer's requirements?
  • How scalable is the infrastructure? Are there glass ceilings that could hamper customers' scalability?
  • Is the facility a stand-alone, independent structure for maximum security?
  • Is the bandwidth, connectivity and peering infrastructure adequate? How proactively is it upgraded, and how frequently?
  • How remote is the data center from your office? Is it within city limits, or located at inconvenient remote fringe areas?

Service and support criteria

  • Can the provider offer you end-to-end solutions for a holistic managed hosting experience?
  • Can they supplement a quality hosting environment with end-to-end managed services, to cater to your requirements?
  • Do they have a history of provisioning customized solutions tailor-made to customer specifications for their previous customers?
  • Do they have a 24x7x365 helpdesk staffed with skilled engineers who can attend to helpdesk calls at odd hours?
  • Remote monitoring and management—can they do it? Do they use world-class, best-of-breed software to do so?
  • Do they have an established customer list with long-standing clients that are some of the most prolific names in industry?
  • References and testimonials-can their customers vouch for them?
  • Do they have a carrier-neutral and vendor-neutral approach?
  • Do they have clearly defined SLAs and escalation procedures?
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